[PerryChase]

I’m rooting for Zillow. I don’t put much credence in their valuation. But I love how they give information such as sales and taxes that was previously hard to obtain.

It think that the more information consumers can obtain on their own, the more they’ll be able to make good decisions.

I remember the days when the only way to obtain info was to contact a realtor who would drive you around and pressure you to buy. Psychology is that buyers feel they owe it to give a realtor business just for driving them around. With Internet technology, a potential buyer can get to know a neighborhood and look around for years before he ever buys anything.

I don’t know about you guys, but when I look to buy anything online, if an items has been on for while, I would not even give it a second look. The same goes for something that is over-the-top in terms of price. I love to see Craigslist items with “make me offer.” Sometimes I get great deals by making a low-ball offer. Most other times, the seller will get offended and say that he has other offers already. But then I see the same item listed again and again with an eventual price reduction back to reality. Internet technology allows the consumer to get a better feel of the market.

Also looking at RE, online listing lets buyers know how much choices there are out there. In the past, the realtor would just show you one sheet of 12 houses and that was it.

I also love ziprealty. Since I signed up on zip realty there were only several properties in my location/price range. Now, I get several emails per week telling me of new listings. The ziprealty agent also doesn’t bother me with useless phone calls. Just the number of ziprealty emails I get lately tells me that the market is down.

I believe you still need a good agent to sell your house, but I would use ziprealty to buy my next home.

We are only at the beginning of changes in how RE is bought and sold. Also my feeling is that coming downturn will be more severe than 1990s because buyers now have access to inventory and information.

[PerryChase]

You’re right bmrum… that was a poor example. I was simply trying to illustrate the fact that there are many reasons why profit figures are obfuscated. Related parties transactions in RE what makes profit margins very difficult to determine. RE projects often times involve multiple entities, but those entities may all lead back to a controlling entity/individual. The landsurvey company maybe owned the wife, the grading company owned by the son, the roofing company maybe a corporation whose’s shareholders are the son, daughter and husband, etc…

[PerryChase]

docteur, like you said it costs about $80-$100 to build a home. Since land is the biggest portion of cost, I don’t see why land can’t drop dramatically. If landowners can afford to hold on during a sharp protracted downturn, then that means that they made a lot of money during the boom.

I don’t put much credence in profit margin figures. For example, car dealerships would have you believe that they are selling cars at invoice. I don’t think they they could really do that for long. Car dealers don’t go out of busines often. In RE, say a landowner buys a piece of land for $10k then sells it for $100k. That’s a profit margin of 1000%. The new owner (maybe a related, but legally separate partnership/corporation) then puts up a building that costs $10k to build. He then sells it for $120K. The profit margin on the 2nd transaction is 9%. The builder then uses the 9% figure to justify that he’s hardly making any money. Notice that the 2nd transaction also allows the first entity’s 1000% profit to be shielded from lawsuits (i.e. construction defects).

As everyone knows, RE is full of related entities that sell to one another ’round and ’round. We’d have to carefully follow the money to determine what the true profit margin of a building/home is.

Only time will tell how RE will turn out in the next 10 years. Personally, I’m biased and I think that we spend too much of our income in RE. A big crash will be the catalyst that causes us to rethink our priorities. For example if land is so expensive, why don’t we build up instead of out (with proportionately lower prices)?

Economically, I believe that the stutus quo proctect builders. If other industries found ways to build better quality products at lower and lower costs, I don’t see why, if forced, the RE industry can’t achieve the same results.

[PerryChase]

“Dallas has nearly the highest airfares in the country. American Airlines dominates the DFW airport.”

Thanks for the info. I did not know that. I guess I won’t be going to Dallas with my own money. This shows how lack of competition can lead to price gouging. Or is that just supply and demand?

[PerryChase]

docteur, profit margin on construction is a lot more than 10-15%. In Texas builders sell 1500+ sf houses for $150k. including the land and still make a healthy profit. The cost of material should be the same everywhere. Labor in California is only slightly more.

I wanted to build a 3-wall 300sf addition to my house and the contractor wanted $100k. For that price, I’d rather go to school and find out how be be my own contractor. Builders would like us to think that it cost $200/sf to build a house. $80 to $100 is more like it.

Builders make a lot of money. If they overpaid for the land, well too bad.

[PerryChase]

I wonder if gays have less marital problem than straights. How do gays work out their housing/real estate and financial situation?

My brother is getting a divorce from his wife. He was nice and gave her the house even though it tripled in value. But she’s still not happy. She’s pissed because brother is perfectly happy getting her out of his hair (even though he’s poorer). She’s miserable so she wants him to be sad too. I admire my brother because he was generous and he’s moving on with his life trying to make himself happy. He said that, money wise, he can make it again.

I hate to say it but I think that women tend to be insecure and constantly need re-assurance. They constantly try to find little ways to control their husbands. I don’t think it’s cute and I don’t understand how people can deal with all this drama.

I have a feeling that gays have a better quality of life (aside the the descrimination).

[PerryChase]

My friend thought that he would hate Frisco/Plano (Dallas) as well…. But he’s been there a few times and now he likes it. He can buy a brand new house for $189k or a new townhouse for $156k. I imagine that he’ll get a condo because living large is not his style.

http://www.kbhome.com/Community~CommID~00874214.aspx

He’ll make 20% more money than in SD. He still loves SD but unless he can find another equally good job, then he’s gone.

He plans to take the money he saves on housing to take frequent vacations all over. Dallas is an airline hub so there’re plenty of cheap tickets to many destinations.

Also, there’s no state income tax in TX.

Don’t get me wrong, I love SD and I would never move to TX myself… but my situation is different from his. I can imagine many middle class families moving out of California to other states.

[PerryChase]

I vote for SD Realtor

[PerryChase]

I agree with Bugs’ analysis. SDrealtor, I also feel that the summer of 2001 is not a good base year. I think that 1997 or 1998 are more representative of the base.

I don’t have exact numbers. But I’ve looked at homes in some of neighorhoods that I’m interested in, I feel that 50% down from the peak is reasonable. In many neighorhoods, today is not the peak, it’s more like 15-20% off of the peak.

I’ll try to quantify the numbers later, if I have time.

[PerryChase]

Well said Powayseller and VCJim. I know so many people who have large mortgages that they can barely handle. They are absolutely maxed out. That’s because they want to keep up with the Jones.

And yes, lenders are guilty for all the easy money. They should’ve demanded fixed rate fully amortized loans. They wanted to make money in the short run so they didn’t enforce their own rules. Another example of greed.

[PerryChase]

The RE industry is highly inefficient in many respects. Remember Denis Hastert making millions on a land deal because of some roads that were built through his legislations? Why should private owners reap windfalls from public expenditures? I read once that, in Singapore, if a landowner gets a windfall from government action, he must share some of his newfound wealth with the public.

Also why are builders not building decent low-cost housing? Why are they building fancy developments? Because there’s more profit margin in the high-end products. Would it not be nice if we could all live in decent houses and pay only 10% -20% of our income on housing? Then we could have better food to eat, better education, more holidays, better quality of life, etc.., and most of all more savings!! Remember the pursuit of happiness?

IMO, RE takes up too much of our resources. Let’s have competition in RE and reform that industry.

[PerryChase]

That buyer will not be unconcerned for long. Of course he is unconcerned now because he’s still in denial. If (when) prices drop, he’ll turn bitter real quick. It’s a classic study in psychology.

[PerryChase]

The RE industry is quasi cartel simply because it’s very difficult to buy and sell without an agent. It’s a highly regulated industry that protects the status quo. We need to reform the industry by allowing more competitive forces while keeping away the scam artists.

Look at the American economy in the last 30 years. Almost every industry has reformed. Industries that are protected charges the highest prices — think RE and medical field.

The RE industry is complex so it’ll take a while to reform. But that doesn’t mean brokers are colluding and conspiring to keep prices high.

Why don’t we allow dental hygienist to clean teeth independently from dentists? Or nurse to treat minor symptoms such as colds? Likewise, we could have sales clerks show houses and legal assistants do the paperwork?

I know… we need to protect the consumer. We have too many Nordstroms in RE, we need some Wal-Marts. I say give consumers choices.

[PerryChase]

I agree that bankruptcy is the best way out for the City of San Diego. We need a fresh start instead of plodding along. We need to spend money on city infrastrure rather than slowly paying all those illegal pension benefits. Those benefits need to be taken back.

[PerryChase]

10-20% profit margin for builder? No, I think it’s much great than that.

Does anyone have information on builder margins?

[Author]

Posts